BANK PERFORMANCE RESPONSES TO FISCAL AND MONETARY POLICY TO MITIGATE EFFECT OF THE COVID-19 IN INDONESIA

Abstract

The implication of the COVID-19 pandemic also have an impact on the threat of a worsening financial system followed by a decline in the performance of various economic activities. The financial and banking sector is one of the industrial sectors most affected by COVID-19 in Indonesia. The current challenge faced by the Indonesian banking sector is in terms of performance. In this case, the role of the government is needed to provide both fiscal and monetary policies in order to encourage optimization of the banking intermediary function. The government has issued a package of fiscal and monetary policies aimed at stimulating economic conditions, including boosting banking performance to deal with the pandemic. During the COVID-19 pandemic, the condition of the banking sector was very vulnerable because many debtors from various industrial sectors were affected by COVID 19, thus experiencing difficulties in carrying out their obligations. This will certainly have an impact on bank performance. However in this condition, banks are still required to continue to provide good performance due to their important role in carrying out the intermediation function of various industrial sectors. This study aims to examine the performance of banks in responding to fiscal and monetary policies in mitigating the impact of COVID-19 in Indonesia. The analytical technique used in this study is a different test, paired sample t test with a significance level of 5%. The results of the study indicate that the government's fiscal policy through a reduction in the income tax rate for domestic corporate taxpayers and permanent establishments, which was originally a single tariff of 25% to 22%, which applies in the 2020 Fiscal Year and monetary policy regarding credit restructuring greatly affects the stability of bank performance. This research is expected to provide implications that the role of the government is still needed to mitigate extraordinary events that can affect the economy.